Upping pension age is the clear way forward

Ryan Heath

"Increasing the pension age to 70 is the responsible and fair thing to do." Photo: Jessica Shapiro

Those outraged by pensions at 70 should think again. We can make this change now amidst growth or during a genuine debt crisis down the track.

Workers under 45 have spent their lives paying-as-they-go for education and health and over-paying for property. It is not fair or sustainable to ask these generations to fund their larger parent generations through an endless retirement.

'To maintain the pension age is an unreasonable tax on young Australians who themselves will never get a pension at 65.'

Age pensions originated a century ago, when most people died before reaching pensionable age. Today the pension age remains virtually the same while life expectancy is 20 years greater and work is far less strenuous and dangerous.

For a quarter of a century Australians have benefited from Paul Keating’s superannuation vision. A system designed to supplement our incomes, extend them through longer life and get us ready to live with a different state pension system.

Advertisement

That day has arrived. To argue we did not know change was coming to pensions is a bit rich; I was discussing this inevitability in my high school economics class in 1995.

We have also lived through 23 years of economic growth and mostly low unemployment. For nearly all Australians there has never been a better time to save or to accrue and draw down on assets.

To maintain the pension age is an unreasonable tax on young Australians who themselves will never get a pension at 65. Their only certainty is paying for the healthcare of todays over-50s.

We could deal with these ageing costs in other ways: increased immigration or increase taxes, for example. We can cut investments in the future (education, research, infrastructure), or we could rob Peter to pay Paul via cuts to hospitals and care. None is palatable.

Let’s also look at the mythical 69-year-old manual worker. Not the cashier at the local shop, but the roadside worker, the construction man, the hotel cleaner. How many of these people really exist? We need to deal in facts not imaginary problems.

Today’s system is no nirvana. My mother, 61, was told by her doctor to retire or risk death in her 50s, but qualifies for neither a disability pension nor an age pension. How is today’s safety net working out for her? We are wrong to idealise what already exists.

Any universal social system has to be based around the majority who work behind one desk or another, and the economic facts of their skills and employment.

Targeted payments and occupational exceptions could enable a different system, but are a slippery slope. Take Greece for example. Until 2013 reforms most Greeks retired around 60 and 580 job categories were deemed arduous or hazardous, allowing retirement at 50 for women and 55 for men. That included airline staff, farmer’s wives and hairdressers.

Greece is not the economic company Australia wants to keep. So what did well-managed Norway do when faced with the pension question? That other developed, rich, social democracy with natural resources linked the pension to life expectancy so that it rises to 70.

Life expectancy will be 90 when the pension age of 70 kicks in. We have the most developed superannuation system in the world and can raise employer contributions to 15 per cent as Keating envisaged, and as Norway has recently done. But we already have the foundation to make the leap.

We can take exception to many parts of the 2014 budget: the slashing of educational opportunities and the excision of twenty-somethings from unemployment benefits. But tackling a structural problem caused by an already pampered generation is not something we can avoid. Those who grew up with, and benefited from, the expansion of the welfare state must now also live with the fiscal consequences.

The Labor base and the ALP itself need to remember that the point of progressive parties is not to set the progress of one generation in aspic. The victorious vested interest of one era must eventually face the legitimate needs and claims of those who follow. That is the only way to maximise opportunity, prosperity and fairness; the true point of any welfare system.

Increasing the pension age to 70 is the responsible and fair thing to do.

Ryan Heath was an adviser to Peter Garrett, a former minister in the Rudd/Gillard government.

349 comments so far

Good article, the Aussie entitlement mentality of free for all pensions is not only unaffordable and unsustainable but also economically irresponsible for the youth generation who have to fund this with increased taxes and a third rate infrastructure. The budget gap will get worse if this pension issue is not fixed and as usual Labor is behaving irresponsible on economics issue considering that they previously raised the pension age. Politicians like Clive Palmer do not care as they are wealthy and hardly any taxes but the the youth of this nation should not be penalised.

Commenter

Regh

Date and time

May 15, 2014, 11:01PM

Politicians like Abbot don't care either when corporate and upper class welfare is running riot. A good start is to reverse the abolishing of the proposed tax on self funded retirees that earn over a million a year. Also means test the parliamentary pension as no doubt the liberals have set up their boys club director jobs on the newly privatised industries that the states will be forced up to sell. The heavy lifting should be done proportionately more by those that can afford it. The liberals are setting up a South African type of community where poverty and crime is the norm. If Liberals get their way the real growth industry will be private security firms and developers that build gated communities, for the kind Liberal party and their slush fund mates.

Commenter

Shane

Date and time

May 16, 2014, 3:38AM

So you think you won't be paying??? Afraid this article misses the point, many points in fact (where exactly do manual workers disappear to??) in the absence of a pension 'young people' will need to help their parents and charities out directly, around the same time you're starting a family. The view that pensioners sit on gold bricks greedily collecting government entitlements comes from the minority, the priveleged of society, the greedy among us assuming the same of others without a shred of fact.

Commenter

Dr Pat

Date and time

May 16, 2014, 4:58AM

@ Regh, you are talking nonsense. Labor tried to tackle the problem of affordable pensions by trying to get those over 65's earning over 100k to pay a measly 15% tax on earnings. Abbott & Co OPPOSED this move.Deductions galore, hidings assets, and paying no tax on earnings is what is destroying our ability to have a fair tax system.Labor raised the pension age to 67 - it is far enough as long as other structural problems within taxation and super are effectively and FAIRLY tackled.The best way to have an affordable pensions system is to help ordinary people put as much into super as possible so they can at least partially support themselves. Once super savings reaches a nominal amount , regular rates of taxation should kick in.

Commenter

CR

Date and time

May 16, 2014, 5:19AM

While I agree with some of your logic workers in white collar jobs at 70 with all the change in work practices is just as challenging at a 70 year old down the pits. People should be encouraged no legislatedRemember if the super does not get stolen in fees or tax the majority will be able to manageIt's the rules changing that make people worried

Commenter

Orpheus

Date and time

May 16, 2014, 5:58AM

My only thoughts to the comment about the youth of the nation is that there would be no youth without the pensioners...The older people of this country have made it what it is not the young ones who have got it easy, very easy when compared to their parents and grandparents

Commenter

wilc

Date and time

May 16, 2014, 6:07AM

Comparing Australia to Norway is not a fair or accurate comparison. They are far smarter and socially responsible towards their citizens than we have ever been. For one they have a sovereign wealth tax on their resources (mining tax), especially on oil. This tax has set up future generations of Norwegians to have the best social support system in the world. While their retirement age maybe 70 they have in place a generous social welfare system for those who can no longer work. They don't throw their citizens on the scrap heap like we do. As for free university education in Australia it only lasted from 1974 to 1988. As only about 3%, mainly males, of the population were attending university. Very few Australians benefited from it. My children have been fortunate enough to have benefitted greatly from having two professional parents both educated when universities were not free. They at least have the smarts to not get involved in generational bashing but appreciate the benefits they have had while also realising that many Australians have not been so fortunate. It's easy for politicians to create these divides as so many are happy to fall for it.

Commenter

ICSBSS

Date and time

May 16, 2014, 6:49AM

More years ago than I care to remember I recall asking why my tax had gone up. I was informed that it was to provide a pension for me in my old age which at that time, was fifty years away.I grumbled a bit but eventually accepted the reasoning behind this. Is this the same sort of grumbling I'm hearing again in my eighty fifth year? I paid taxes for over fifty years for the promised pension and I'm supposed to feel guilty? You have a long way to go young man, and much to learn!

Commenter

creeker

Date and time

May 16, 2014, 7:23AM

I agree you can't blame the next generation for the current budget position, any fair minded elderly person with respect for their fellow human being would understand this and demand to do their bit. Unfortunately, fair is not exactly a buzz word for the baby boomers. I am starting a new political party Generation XYZ Australia, join me we can create a fairer more productive society today. I warned years ago of what was coming.